Key issues: Financial regulatory reform

More than four years after President Obama signed the landmark Dodd-Frank Act into law, the SEC continues to write rules pertaining to corporate governance. Under the direction of SEC Chair Mary Jo White, Dodd-Frank rulemaking remains a priority.

Some of the rules are still waiting to be finalized, including executive compensation clawback policies, disclosure of certain employees’ and directors’ hedging activities, ratios of CEO pay to the median of the annual total compensation for employees (if finalized in 2015, would apply in 2017 proxy season), and pay versus performance disclosures. About 25% of the 398 rule-making requirements under the law have yet to be proposed.

In 2014, the conflict minerals disclosure rule was implemented with the first disclosure reports filed in May. The rule requires public companies to disclose whether conflict minerals used by the company (tantalum, tin, tungsten, and gold) originated in the Democratic Republic of the Congo (DRC) or adjoining countries. Additionally in 2013, a rule adopted by the SEC requiring exchanges to add listing standards that called for independent compensation committee members and committee advisors was implemented.

The Volcker rule, with final provisions released in January 2014, prohibits insured depository institutions and affiliated companies from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments for their own account.

Five months after the rule went into effect, depository institutions attempting to implement it are facing ambiguities. 2015 may be a learning curve as both banks and regulators deepen their understanding of the new regulation.

In June 2014, the SEC released its final rule regarding cross-border security-based swap activities.

In summary, there are many open Dodd-Frank mandates and proposed rules affecting boards and their companies that could continue to have a near-term impact.